Commercial deal volume sees exaggerated Q2 growth, but more substance lies beneath headline numbers

Look at the annual growth rates for commercial deal volume reported by Real Capital Analytics (RCA) in the second quarter and you’ll see something highly out of the ordinary: Three-digit numbers.

It certainly makes for an impressive set of headline figures at first blush. Total commercial deal volume, by dollar amount, soared 176% year over year during the second quarter. Industrial deal volume was up 139% year over year. Apartment transaction volume was up 238% over the same period. Annual growth in hotel deal volume dwarfed every other segment, vaulting an astounding 1,718% from the second quarter of 2020.

Of course, those growth rates are very much artificially inflated. The whopping gains are largely a result of normalizing numbers this year being compared to the lows the market hit during the summer of 2020, when many COVID-related restrictions were in full swing. The hotel sector, in particular, was battered thanks to lockdowns throughout the nation curtailing both leisure and business travel; renewed investor interest since the segment has begun to recuperate accounts for its stunning yearly surge. RCA noted that such abnormally high growth rates could be the norm into the third and fourth quarters, given how much the American economy ground to a halt last year.

Still, when comparing second quarter numbers to norms during the same period in the five years pre-pandemic, it’s notable that this year’s figures still measure up favorably. Overall commercial deal volume during the second quarter, for example, totaled $144.7 billion, up 14% from the $127.2 billion averaged across the second quarters from 2015 to 2019. And it’s not just because of one particularly big portfolio-level deal — compared to the second quarters from 2015 to 2019, the level of such large deals was up just 3% in Q2 2021.

Comparing sector-by-sector numbers yields similar results, though some remain on a better recovery trend than others. Still, the takeaway is clear: Though year-over-year growth figures are greatly exaggerated, the commercial real estate market is not just bouncing back. It may be in fact be on its way to kicking off a new expansion period.

The recovery thus far has been spearheaded by sales of individual assets. Sales of such properties for this year’s second quarter was at $111.0 billion, 17% higher than the average for second quarters from 2015 to 2019.

And asset pricing is responding to the uptick in activity. During the second quarter, RCA’s National All-Property Price Index grew 9.8% annually, compared to just 3.6% in the same quarter last year.


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